Is Free Trade Always Good? Not In Virginia

David Ress

December 13, 1993|By DAVID RESS Daily Press

One of the most important testing grounds of Bill Clinton's economics is going to be on the piers of Hampton Roads.

If, in the months ahead, there are lots of ships under the multi-story container cranes at Norfolk International Terminal and more of those rusty, 700-foot-long ships down at the coal piers of Newport News, that will mean Clinton's plan is working.

Or so said Larry Summers, who as undersecretary of the Treasury is the country's top international economics official, during a recent swing through Tidewater Virginia.

International trade policy, what with last month's passage of NAFTA or this month's race in Geneva to finish up negotiations over a new General Agreement on Tariffs and Trade, has become a top priority in Washington.

It's a bit of a shift.

During the election campaign, Clinton seemed cautious on NAFTA, a free trade pact between the United States, Mexico and Canada. Fears that the agreement would lead American companies to close U.S. plants and replace them with factories in Mexico, paying workers a fraction of what U.S. workers earned, haunted many Democrats. The GATT talks seemed like the ultimate in insider policy-wonk obscurity - something that policy-makers agonizing over domestic unemployment and health care reform could put on the back burner.

One reason for the shift is that a muted intellectual battle over trade theory has been fought in Washington, and spoils have gone to the mainstream of economic theory.

The losers were economists who challenged one of the central dogmas of economic theory: that free trade is always and forever a good thing.

The winners say that free trade means bargains for consumers. If it is more efficient (read: cheaper) to grow peanuts in The Gambia than in Virginia or North Carolina, then it makes sense to import Gambian peanuts here. Most Americans will be better off if they pay less for their peanuts, the argument goes. Peanut farmers in places like Isle of Wight County, Virginia, may be up a creek, but as any good mainstream economist will say, you can't make an omelet without breaking eggs.

Any good Isle of Wight boy like me, though, will say there's a big difference between Virginia peanuts and those grown anywhere else. You can challenge the dogma that free trade is always good by stressing that quality varies, and that Americans may be better off paying more for better peanuts.

Another challenge to the dogma, near and dear to people in Tidewater Virginia, is that the strategic interests of a country ought at times to override the benefits of importing cheap goods.

Take, for instance, shipbuilding.

Newport News Shipbuilding employs over 20,000 people, and around here, it's tough to make the argument that we'd be better off if American ships were built in lower-cost foreign yards.

What we say to people who don't necessarily agree is that building ships for the Navy is too important to national security to leave to foreigners. In fact, we take a step beyond to argue that having the capability to build ships for the Navy is so important that the government ought to take steps to keep the yard busy, even if it means building Navy ships sooner than they're needed, or subsidizing commercial ship construction, or ending foreign countries' subsidies of their shipyards.

Maybe, Tidewater Virginians' completely impartial views of trade policy with respect to peanuts and industrial policy with respect to shipyards suggest that the free trade dogma sometimes ought to be taken with a grain of salt.